Iran's economic crisis: Sanctions, policies, and corruption

Report by Lea Fayad, English adaptation by Yasmine Jaroudi

Iran is home to the world's second-largest gas reserves, after Russia, and the second-largest oil reserves in the region, after Saudi Arabia. 

The country boasts a strategic location between Asia and Europe, with 89% of its population being literate—higher than the global average. These factors position Iran to be one of the world's largest and strongest economies. 

However, several challenges have hindered its economic growth:

For decades, Iran has been under heavy sanctions imposed by the United States and Western countries due to its nuclear program and regional policies. 

Before the Russia-Ukraine war, Iran was the most sanctioned country in the world. These sanctions have isolated Iran from the global financial system and disrupted its trade with other nations, as they cut off crucial foreign currency earnings, especially from oil exports, which constitute about half of the state's revenue. 

Between 2012 and 2018, Iran's economy shrank by nearly half due to President Obama's tightening of sanctions before the 2015 nuclear deal, and following President Trump's withdrawal from the agreement. 

Despite recent efforts to circumvent sanctions by exporting oil to China, Iran struggles to generate sufficient revenue as it sells its products at lower prices.

The government's economic policies over time have failed to improve revenues significantly. Strategies such as increasing debt from domestic banks and funds, imposing taxes and fines (including those related to the hijab), and reducing currency support have not helped. 

These measures have led to the Iranian Rial losing more than half its value under President Raisi, rampant inflation, and widespread poverty, with more than half of the population now living below the poverty line.

An even deeper issue is that three-quarters of the economy is controlled by the state and affiliated organizations, amidst widespread corruption in the public sector, fostering significant corruption. 

Iran ranks among the most corrupt countries on the Transparency International Corruption Perceptions Index. This dominance of the public sector stifles private enterprise and discourages investment, hindering economic diversification beyond oil.

Among the current presidential candidates, some seek to continue Raisi's policy of economic self-reliance and strengthening trade relations with Asia. 

In contrast, others advocate for broader international relations to aid the economy. 

The presidential debates have focused on financial imbalances, resource mismanagement, and corruption—issues deeply rooted in the country and difficult to reform according to voters.